Executive Summary

Legislation to prevent excessive spending by electoral candidates in the United Kingdom has been in place since 1883. The UK’s system of regulating campaign financing focuses on limiting the expenditure of political parties and individual candidates, rather than limits on donations that can be received by these parties and individuals, combined with a transparent reporting system of donations received and election expenditure incurred .

Introduction

Legislation to prevent excessive spending by electoral candidates in the UK has been in place since the Corrupt and Illegal Practices Prevention Act 1883.[1] The current law regarding campaign financing in the United Kingdom is contained in the Representation of the People Act 1983 (RPA) and the Political Parties Elections and Referendums Act 2000 (PPERA). The UK’s system of regulating campaign financing focuses on limiting the expenditure of political parties and individual candidates, rather than limiting the donations that can be received by these parties and individuals.

There are three types of distinguishable regulated expenditure during a general election: “distinction is made between ‘campaign expenditure’ incurred to promote a party or its policies in general, ‘controlled expenditure’ incurred by registered third parties to promote parties or candidates, and ‘election expenditure’ incurred on promoting a specific candidate.”[2]

This report will focus on campaign financing relating to general parliamentary elections to the Westminster Parliament (hereinafter “general election”), which are held at least once every five years. The political party that wins the most seats at a general election then goes on to form the government. These elections must occur every five years, or when Parliament has been dissolved through a Royal Proclamation, as issued upon the advice of the Prime Minister. There are not set timetables[3] for when an election should be held, other than the requirement that it occur within the five-year maximum life of Parliament. As a result, the Prime Minister has a political and tactical advantage in being allowed to decide the date of the general election. The average length of Parliament since 1945 has been three years and seven months.

Given the way that Parliament is dissolved, the duration of the campaign period is very short, being generally six to seven weeks.[4] For the last general election, the formal announcement of the election was made on April 4, 2005, and elections were held on May 5, 2005.

Financing of Political Parties

The PPERA substantially overhauled the regulation of campaign financing with regard to political parties. Prior to this act, the role of political parties in fundraising money for elections was unregulated.[5] The PPERA introduced a regime aimed at increasing transparency in donations to political parties.

The PPERA subjects political parties to campaign spending limits (known as “campaign expenditure”) a year prior to a general election. As the date of a general election is typically not known until a few weeks prior, to comply with the law, political parties must continually maintain records of their expenditure and received donations. Spending by individual candidates on their election expenses is generally excluded from this definition of campaign expenditure and is regulated through the RPA, as amended by the PPERA (see discussion, below).[6]

The definition of campaign expenditure for political parties extends to “party political broadcasts, advertising, unsolicited material to electors, manifesto or other policy documents, market research and canvassing, media/publicity, transport, rallies or other events.”[7] The law also requires that any notional expenditure (incurred when another person pays the cost that the political party would have otherwise had to pay) be counted as a campaign expenditure incurred by the party.[8]

The campaign spending limits of political parties is considerably higher than that of individual candidates. In the 2005 general election the national campaign expenditure limits were £30,000 (approximately US$42,000) per constituency contested. For all three major parties contesting seats nationwide, this amounts to around £19 million (approximately US$26 million).[9]

In the 2005 general election the campaign expenditure of the Conservative Party was £17.85 million (approximately US$25 million), £17.94 million (approximately US$25 million) for the Labour Party, and £4.32 million (approximately US$6 million) for the Liberal Democrats.[10]Additionally,the two main political parties combined expenditure in the twelve months prior to the election was approximately £90 million (approximately US$126 million).[11] The higher figure takes into account the annual expenditure of these parties.

Donations to Political Parties

There are no limits on the amount of donations that political parties may receive; however, there are laws that govern who may be a donor, as well as limits, noted above, on spending by political parties on campaign expenditure. The aim of the law is to regulate donations to political parties through transparency, as political parties must make their finances public.[12] Political parties may only accept donations above £200 (approximately US$280) from “permissible donors.”[13] Donations are defined in the PPERA to include “gifts of money and property; subscriptions and affiliation fees; sponsorship; money spent on behalf of a party; the provision of property, services, or facilities; or the lending of money other than at commercial rates.”[14] Permissible donors are defined as: an individual registered on a UK electoral register; a UK registered political party; a UK registered company; a UK registered trade union; a UK registered building society; a UK registered limited liability partnership; a UK registered friendly/building society; or a UK based unincorporated association.[15]

Until the Electoral Administration Act 2006,[16] donors to political parties were legally obliged to report their donations to the Electoral Commission by January 31 of the year after the donation was made if they donated more than £5,000 (approximately US$7,000).[17] This was repealed, as “in practice this provision has been of little use.”[18]

Foreign donors, other than registered British electors living abroad, are not considered to be permissible donors. If a donation is received from a donor that does not fall into these categories, the political party must return the donation or, if the donor cannot be identified, return the money to the Electoral Commission.[19] If the Electoral Commission believes that a political party has received donations from a non-permissible source they “may seek forfeiture orders in the courts to recover from political parties the value of donations.”[20]

Reporting Requirements of Donations

Donations over £5,000 (approximately US$7,000) to the main political party offices, or over £1,000 (approximately US$1,400) to constituency or local party offices, are required to be reported to the Electoral Commission. These reports are required to be made on a quarterly basis, and every week during a general election campaign.[21] As a result of a loophole in the PPERA, the major political parties took out loans to circumvent the rules in this Act during the 2005 Parliamentary election.[22] The law has since been amended and now any loans, as well as sponsorship, must also be reported in the same way as donations.[23]

Reporting Expenditure

After general elections, political parties are required to submit a report that details all party campaign expenditure they incurred to the Electoral Commission. This report does not include the election expenses of any individual candidate, which continues to be regulated under the RPA.[24]

The report is required to include the itemization of all items that money was spent on and must be submitted within three months of the election if the parties incurred less than £250,000 in campaign expenditure. For parties that spent more than £250,000 the reports are to be submitted within six months of the election, and include a statement from an independent auditor.[25]

Financing of Individual Candidates (Election Expenditure)

Under the RPA and the PPERA, candidates for elections have spending limits that they cannot exceed (known as “election expenditure”), and they may not incur personal election expenses of more than £600 (approximately US$840).[26] These limits are set through secondary legislation by the Secretary of State and may only be changed when the Secretary of State “considers that the variation is expedient in consequence of changes in the value of money” or upon the recommendation of the Electoral Commission.[27] For the 2005 general election the limits for candidates under the RPA was “£7,150 [approximately US$10,000] plus £0.05 [approximately US$0.07] per elector in a borough (urban) constituency and £0.07 [approximately US$0.10] per elector in a county (less densely populated) constituency.”[28] The Electoral Commission reported that the average amount spent by an electoral candidate at the 2005 general election was £4,000 (approximately US$5,600).[29]

Issues with Spending Limits

The current law provides that spending limits apply for expenses that are incurred from the point that Parliament is dissolved, which is when an individual typically becomes an electoral candidate.[30] Items or services purchased prior to the dissolution of Parliament, but used afterwards in the candidate’s election campaign, count towards the candidate’s spending limits. This law has caused concern that significant amounts of money have been spent by potential candidates prior to the dissolution of Parliament, as the law in its current form does not regulate this type of expenditure.[31] As the expenditure is not regulated, there are no official figures; however, the Electoral Commission has noted that candidates were concerned that the start date for spending limits on election expenditure was too close to the election date, thus “a significant period of campaigning would therefore not be regulated by the new controls [and it would effectively] … render candidates’ expenses limits meaningless.[32]

An Impact Assessment from the UK’s Ministry of Justice notes that the current law allows electoral candidates “to undertake high levels of spending up until, in practice, five or six weeks before the date of the election. This has resulted in damage to public confidence in our electoral system and the perception that it is possible to buy electoral advantage.”[33]

A bill is currently before Parliament that would alter the time frame that the spending limits apply to electoral candidates, to take into account spending prior to the dissolution of Parliament. The Political Parties and Elections Bill provides that:

all expenditure used by or on behalf of the candidate [for election expenses] which are used for the purposes of the candidate’s election, are regulated by the candidate spending limit. The person’s formal candidature status (whether adopted as a candidate or not) does not determine whether or not the expenditure is regulated. The purpose for which expenditure is used will be the key consideration.[34]

Definition of Election Expenses

The Electoral Commission has provided guidance on items considered to be election expenses and includes such things as costs associated with:

printing and distributing leaflets; advertising material; expenses associated with the telephone and internet; administrative costs, such as the maintenance of a campaign office; postage; expenses relating to holding public meetings; fees paid to election agents, sub-agents, polling agents or to clerks and messengers during the election etc.; and expenses relating to the hire of committee rooms during an election.[35]

It considers that:

Election expenses are any expenses incurred in promoting a candidate's election. All expenses incurred in relation to items used to promote a candidate during a specified period must be treated as the candidate's election expenses and count against the candidate’s election expenses limit, regardless of when the expenditure was incurred.[36]

Reporting Requirements for Electoral Candidates

Candidates are required to submit a return detailing their campaign expenses to the Electoral Commission within thirty-five days of the declaration of the election result.[38]Donations of more than £50 to the candidate must be included in the return. [39]

Indirect Funding

There are a number of other ways through which political parties and individual candidates can derive benefits without having to incur expenses. One of the most notable aspects for political parties is that, as paid political advertising in the broadcast media is prohibited in the UK, political parties receive a certain amount of broadcasting time on national television and radio free of charge.[40] The formula for the allocation, length, and frequency of party political broadcasts are determined by the independent communications regulator Ofcom (Office of Communications) for commercial broadcasters with public service obligations.[41] The rules provided by Ofcom are that “Major parties will normally be offered a series of broadcasts before each election…. Other registered parties may qualify for a broadcast on the basis of contesting one sixth or more of the seats up for election, modified as appropriate for proportional representation systems.”[42] The British Broadcasting Corporation is not regulated in this respect by Ofcom, but carries a provision in its charter agreement that it will carry party political broadcasts.[43]

Candidates at parliamentary elections are entitled to one election communication (weighing up to 6 oz.) delivered by post without charge to every elector or address within a constituency.[44] Candidates may also use state-funded school premises or other public meeting rooms for the purpose of holding election meetings without charge.[45]

Campaign (‘Controlled’) Expenditure by Third Parties

Individuals or groups that aim to promote or disparage electoral candidates are also subject to controls and restrictions on the campaigning that they can do. They may incur expenditure (referred to as “controlled expenditure”[46]) by holding public meetings or organizing public displays, or by issuing advertisements, circulars, or publications. They can spend up to £500 (approximately US$700) at a general election “presenting to the electors the candidate or his views, or the extent or nature of his backing or disparaging of another candidate.”[47]

National Election Expenditure by third parties varies considerably. In this instance, third parties may apply to be “recognized” third parties by the Electoral Commission. Upon becoming a recognized third party, the level of controlled expenditure promoting one party or disparaging another[48] increases to a maximum of £793,100 in England, £108,000 in Scotland, £60,000 in Wales, and £27,000 in Northern Ireland in the year leading up to an election.[49] If no notice has been given, the limit of expenditure permitted is reduced to £10,000 in England and £5,000 in Scotland, Wales, and Northern Ireland.[50] Recognized third parties must complete a return that specifies the election that occurred and all controlled expenditure that was incurred during this period.[51]

Freedom of Speech and Expression Issues

The ban on paid broadcasting has raised questions as to whether it infringes the right to freedom of expression addressed inArticle 10 of the European Convention on Human Rights, which was given effect in the domestic law of the UK by the Human Rights Act 1998.[52] In a case from the European Court of Human Rights involving a ban of political broadcasts in Switzerland,[53] the court held that the ban on political broadcasts there infringed the right to freedom of expression, but did concede that a prohibition could be compatible with this article in some circumstances if it met a “pressing social need.”[54] In an older case specifically relating to the UK paid political broadcasting ban before the European Commission of Human Rights, the court held that it was compatible with the Convention.[55] In the UK, “the ban on political advertising has been a major factor in limiting the amount of money political parties can spend on election campaigning and therefore on the amount they have to raise. As a result, there is broad support for the ban among the political parties in the UK.”[56]

Prior to the PPERA, there was a £5 limit of contributions that third parties could make towards election campaigns as they were considered to be an election expense.[57] A case was brought against the UK and went to the European Court of Human Rights, which decided that the limit of £5 (approximately US$7) was contrary to the right of freedom of expression contained in Article 10 of the European Convention on Human Rights.[58] The provisions in the PPERA regulating third-party contributions were introduced to address the consequences of that judgment.[59]

Concluding Remarks

Campaign financing laws continue to be an ongoing concern in the UK. Loopholes in the law that provide political parties and candidates with the means of bypassing spending limits are being exposed and closed, and yet at the same time the duration of the spending limits on individual candidates are proving to be ineffective. The government is currently looking to legislate on these issues and the various provisions they are considering show the difficulty in finding an effective resolution.

[21] PPERA, §§ 62-63; THE REVIEW OF THE FUNDING OF POLITICAL PARTIES, supra note 11, at 10. The forms for reporting donations are available on the Electoral Commission’s website, athttp://www.electoral commission.org.uk.

[46] “Controlled expenditure” is defined in section 85 of the PPERA as “expenses incurred by or on behalf of the third party in connection with the production or publication of election material which is made available to the public at large or any section of the public (in whatever form and by whatever means).”

[49] Only individual residents in the UK, registered UK overseas electors, a registered party, or a permissible donor within the PPERA may give notification to the Electoral Committee and become a recognized third party. PPERA §§ 88-95.